Blow to FBR: PHC gives stay against extra cost of Track & Trace System

Mehtab Haider
Sunday, Jan 16, 2022

ISLAMABAD: Four cigarette manufacturers have approached the Peshawar High Court for barring the FBR from signing a tripartite agreement for bearing the extra cost for implementing the Track & Trace System and obtained a stay order.

The petitioner approached the PHC against the extra cost of Unique Identification Marking (UIM)/stamp imposed upon them through proposed draft tripartite space agreement including the provision for installing the system, electricity cost, internet, and delivery charges of Rs 600,000 in case of additional contract.

Four cigarette manufacturers namely Sarhad Cigarette Industry, International Cigarette Industry, Universal Tobacco Company, and Asia Tobacco Company approached the Peshawar High Court through filed petition and pleaded that the draft tripartite agreement imposed an undue financial burden upon the petitioner companies and termed it as illegal, unlawful, arbitrary, malafide and without jurisdictions and violative of petitioner companies rights as guaranteed by the Constitution.

The FBR has installed Track and Trace System for the sugar industry all over the country to gauge the real production and for collection of the due taxes. Now the FBR has been making efforts to implement the same arrangement for the tobacco industry as in the pilot phase it had installed Track and Trace in Pakistan Tobacco Company (PTC) unit located at Jhelum a few months back that was inaugurated by Minister for Finance Shaukat Tarin and the Chairman FBR Dr. Mohammad Ashfaque. With the introduction of Track and Trace for the sugar industry, the tobacco industry had to follow the suit in order to curtail the extent of illicit cigarettes in the country. The formal sector has estimated that the share of illicit cigarettes causes an annual loss of approximately Rs 77 billion to the national exchequer. However, the FBR has never done any official study and made it public to assess estimates of massive losses caused by the illicit cigarette on a per annum basis. It was simply a blow to the efforts of the Federal Board of Revenue (FBR) as four cigarette manufacturers approached the PHC to seek relief from signing the agreement to implement a Track and Trace system at their factories.

The PHC has granted them an interim relief to the four petitioners and has maintained that the petitioners must not be compelled to sign the agreement to implement the Track and Trace system.

This scribe contacted FBR high-ups on Saturday, they said that four cigarette manufacturers obtained interim relief by getting stay orders from the PHC and the next hearing was fixed for early February 2022. The FBR would oppose it by pleading before the court that the same tripartite agreement was signed with all sugar mills and this agreement was not in violation of any constitutional right. However, the industry sources expressed fears that if these four manufacturers do not sign the agreement and implement the system, the government will not be able to enforce it at the retail level in true letter and spirit. There also seems to be an apprehension that other manufacturers may become a party to this petition and also seek relief from PHC.

Firstly, the Track and Trace System must be launched across the industry for it to be successful and yield the desired results otherwise it will be an exercise in futility. Secondly, comprehensive and effective enforcement needs to be carried out by the Inland Revenue Enforcement Network to ensure that no pack of cigarettes is sold without a stamp. The track and trace system has proven successful in various countries across the globe but the problem in Pakistan is that of locally manufactured tax evaded products.

Since Pakistan is rolling out such a project for the first time, the government needs to learn from the developed world to ensure that we avoid the mistakes made by other governments in the implementation of such systems.